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Thursday, March 3, 2016

Thrifty Thinking: Tax Tips for Household Services

There
is often more in hiring someone to help with work around the home than
simply paying on time. A recent Care.com HomePay poll found only 47
percent of families reported
the household wages on home help, such as babysitters, dog walkers and
yard workers. Many families are simply unaware of these so-called
“nanny tax” rules or the generous breaks that may be applicable each
year for families. Additionally, in a recent Care.com
survey when asked the most difficult part of paying “nanny taxes,” the
number one response was “understanding the difficulties of the various
employer/employee taxes.”

Child Care Tax Credit: Savings of $600 for one child and $1,200 for two or more

Common Mistakes

According
to the IRS, if a family paid more than $1,900 (which increased to
$2,000 for 2016) to their nanny, housekeeper, babysitter, etc. within
the 2015 calendar year, that
worker should be considered an employee of the family who hired them.
Therefore, the family is considered a household employer and is required
to pay taxes accordingly - better known as the “nanny tax.” The most
common mistakes families make with household
employees are often unintentionally simple ones, but they can cost
thousands of dollars in penalties and other liabilities.

Some of those include:

Forgetting to file nanny taxes on a timely basis

Filing a household employee as an independent contractor vs. an actual employee

Disregarding overtime

Failing to provide worker’s compensation insurance

Overlooking any local or state Domestic Worker Bill of Rights

For more helpful information on nanny taxes and useful family budgeting tools, visit
www.myhomepay.com